Stifel raises price target on Air Canada stock

On July 28, Air Canada (Air Canada Stock Quote, Chart, News, Analysts, Financials TSXV:AC) reported operating income of $418-million in the second quarter of 2025 on revenue of $5.63-billion, resulting in an operating margin of 7.4%. Adjusted EBITDA came in at $909-million, or 16.1% of revenue.

The company posted adjusted pre-tax income of $300-million, while adjusted net income totalled $207-million, or 60 cents per diluted share. Net income for the quarter was $186-million, or 51 cents per share. Adjusted cost per available seat mile was 14.4 cents. Air Canada generated $895-million in cash from operating activities and $183-million in free cash flow.

As reported by The Globe and Mail, Stifel analyst Daryl Young raised his target for Air Canada shares to $25 from $23 in a July 31 note, maintaining a “buy” rating. The new target is just below the current analyst average of $25.31.

He said the airline’s second-quarter results showed continued stability in the operating environment and strong indicators for demand heading into the fall and winter travel seasons.

“We are updating our estimates following AC’s Q2/25 results, making relatively minor changes; the environment remains stable, with strong initial demand/yield indicators heading into the fall and winter seasons (continued off-peak booking strength into Sun destinations, Atlantic, and Pacific markets),” Young said. “We are a bit perplexed by the 12% share price decline given the relatively inconsequential EBITDA miss, unchanged guidance, and strong FCF generation, and believe the pullback presents a buying opportunity.”

Young noted 2025 was always expected to be a transition year for the company, with inflation-related cost pressures, particularly from wage agreements, still being absorbed. He said Air Canada is continuing to grow into its infrastructure, as capacity only recently returned to 2019 levels. However, he highlighted positive execution across the business, including strong results from sixth freedom traffic and premium cabins, improved on-time performance, healthy free cash flow, and the addition of new aircraft that will support future growth.

Air Canada President and CEO Michael Rousseau also pointed to operational gains in the quarter.

“Operationally, we had an excellent spring, leading all major North American carriers in on-time performance for both May and June, which corresponded with strong gains in customer service scores,” he said in a press release announcing the results.

He added that Air Canada is continuing to follow its long-term commercial strategy while responding to geopolitical and economic uncertainties by redirecting capacity to high-demand markets and focusing on premium services. He also noted strong contributions from Air Canada Cargo, Air Canada Vacations, and Aeroplan, which he called “key pillars” of the company’s diversified business.

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